Bill 20 – THE MANITOBA BUILDING AND RENEWAL FUNDING AND FISCAL MANAGEMENT ACT
The Manitoba Chambers of Commerce, established in 1931, is the umbrella organization for Manitoba’s chamber movement. With a membership comprised of Local Chambers of Commerce as well as direct Corporate Members, the Manitoba Chambers of Commerce is Manitoba’s largest and most diverse business lobby, representing over 10,000 businesses and community leaders.
We are pleased to be able to provide comments on Bill 20 – The Manitoba Building and Renewal Funding and Fiscal Management Act. When the Balanced Budget, Debt Repayment and Taxpayer Protection Act was implemented in Manitoba in the mid 1990’s it was viewed as an important measure to ensure the provincial government of the day had a duty and obligation to spend taxpayers money wisely.
Provisions in the Act provided Manitoba taxpayers with confidence that governments would not return to running annual deficit budgets without consequences. A key element of the Balanced Budget Legislation was that governments could not raise taxes without first going to the public through referendum.
Unfortunately what has been happening over the past number of years is that the provincial government has been continually amending Balanced Budget Legislation to the point where it barely resembles the Act that was established in the mid 1990’s.
The most recent changes as outlined in Bill 20 – The Manitoba Building and Renewal Funding and Fiscal Management Act to Manitoba’s Balanced Budget Legislation are of a major concern to not just the business community but all Manitobans.
Bill 20 proposes increasing the Provincial Sales Tax (PST) in the province from 7% to 8% resulting in a revenue increase to the provincial government of $277 million annually. The most troubling part of the government’s decision to increase the PST is the fact they are also changing the current Balance Budget Legislation which had stipulated that a referendum of Manitobans be held before increasing the PST.
At the Manitoba Chambers of Commerce 82nd Annual General Meeting held May 3-5, 2013 at the Elkhorn Resort and Conference Centre a resolution was passed unanimously by the Chambers in regards to the government’s recent decision to increase the Provincial Sales Tax (PST) from 7 per cent to 8 per cent effective July 1, 2013.
The resolution passed by members is as follows: That the Premier of Manitoba respect the province’s current Balance Budget legislation and the right for the people of Manitoba to have a voice in the decision on whether or not to increase the Provincial Sales Tax (PST) by 1% by holding a public and binding referendum s in which all citizens can either approve or disapprove of this increased tax.
In addition Chamber members also raised concerns with how this proposed tax increase will make our already uncompetitive tax framework even more unattractive.
Manitoba businesses have raised concerns about how increasing the PST to 8 per cent will make us competitive with Saskatchewan which recently lowered their PST to 5 per cent.
When you add the increased PST along with our higher personal income tax rates, higher corporate income tax rate and that we remain one of the only provinces in Canada that continues to have a Payroll Tax it clearly shows we are establishing an uncompetitive tax framework when compared with other provinces.
According to a recent analysis by the Fraser Institute the PST hike that the provincial government is proposing will also result in a reduction in jobs and income growth.
Here’s why: The provincial sales tax applies not only to items bought at the register but also to the cost of doing business. That includes capital goods (machinery, equipment and new technologies), materials, energy and other goods or services that entrepreneurs purchase and use to produce what they sell to their customers.
The higher cost of capital goods is by far the most detrimental feature of the PST, since investments in machinery, equipment and technology are the foundation of a stronger and more productive economy. A higher PST rate will further increase the cost of doing business, leaving entrepreneurs with less money to operate, expand, innovate, hire people and pay higher wages.
Partly due to the PST, Manitoba had Canada’s second-highest overall tax rate on new investment in 2012 at 26.3 per cent. For perspective, the comparable rate was 16.2 per cent in Alberta and 17.9 per cent in Ontario.
In a world where provinces compete for mobile investment dollars, increasing the PST will make it even more expensive to invest and do business in Manitoba. By deterring investment, Manitoba families ultimately lose because less investment means reduced job creation and income growth.
From the Chambers perspective this government’s decision to increase the PST raises a number of other questions?
- HOW will the $277 million received as a result of the increase be invested?
- WHAT plan is there to provide a solution for the significant municipal infrastructure deficit?
- HOW will challenges for the business community surrounding an already uncompetitive tax framework (Saskatchewan currently has a PST of only 5%) be addressed?
- WHAT is the potential impact the proposed increase will have on consumers and businesses?
The reality is the government has yet to articulate an answer to any of these questions. In fact these answers should have been provided to Manitobans before the legislation was ever introduced
The Chamber stands firm in its opposition to the Province’s decision to increase the PST. The blatant disregard for proper process around changing the legislation to avoid consulting with Manitobans is unacceptable.
We believe in holding broad discussion around the issue of the tax increase and have called on the government to abide by the law and take it to a referendum. The Province must not only let citizens have their say, but also take a step back to provide some answers.
The Chambers believe that a referendum provides many benefits as it provides clarity of purpose, transparency of investments, greater accountability in the reporting of results and show respect for the hardworking taxpayers of Manitoba.
Businesses across the province are clearly concerned with not only the government’s decision to increase the PST but also the manner in which they are trying to accomplish it. We have urged the government to respect the legislative process.
The Manitoba Chambers of Commerce had called on the provincial government to delay the implementation of the proposed increased to the Provincial Sales Tax (PST) from 7 to 8 per cent until Bill 20 was passed and the business community has an acceptable amount of time to make the proposed changes – unfortunately that appears to have been considered .
If your government truly believes that increasing the PST is in the best interest of Manitoba and will create a strong competitive economy then you should be prepared, willing and enthusiastic to engage Manitobans and take this proposal to the people.
Unfortunately for Manitobans this government doesn’t appear to be interested in engaging in a dialogue on this issue.
President & CEO
Manitoba Chambers of Commerce